The steep drop in the price of oil and related impact on federal finances prompted the Conservative government to delay bringing down the Budget. But despite a $6 billion hit to Ottawa’s revenues, Finance Minister Joe Oliver was determined to meet the government’s commitment to balance the operating budget by fiscal 2015-16, after seven years of red ink. Doing so required adding some modest amounts from asset sales and shrinking the contingency reserve, but in the end the government managed to erase last year’s small deficit ($2 billion) and is forecasting a razor-thin $1.4 billion surplus for 2015-16.
- As promised, the 2015-16 Budget is balanced. The government projects small surpluses through to 2019.
- The economic back drop is challenging as the drop in oil prices is weighing on economic growth and federal revenues. Real GDP growth is now projected to be 2.0% this year, whereas the September Fiscal Update foresaw growth of 2.6% in 2015.
- Budget 2015 had few surprises and felt like a pre-election document, as it delivered some targeted tax relief and reiterated many previously announced tax and spending initiatives.
- The Budget extends accelerated depreciation for eligible investments by manufacturers and reaffirms higher depreciation rates for LNG plants.
- There is also more tax relief for small businesses from a phased-in reduction in the small business income tax rate from 11% to 9%, in four increments starting next January.
- The government confirmed pre-budget speculation by enriching the Tax-Free Savings Account Program; the annual contribution limit rises from $5,500 to $10,000.
- The government is continuing with existing infrastructure funding commitments and is also investing a further $750 million over two years starting in 2017-18, and $1 billion per year thereafter, in a new Public Transit Fund.
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